A widely-acclaimed researcher, teacher of various universities in India and abroad, a prolific writer, a distinguished orator and an Indologist of repute, a globetrotting management guru, Dr Kailash Chandra Mishra has added many feathers unto the cap of mother Odisha by his spectacular achievements in very many fields of human endeavour. A think tank of Indian economy, he is a former Director of the National Insurance Academy, Govt. of India, at Pune. He was the head of the Lal Bahadur Shastri Institute of Management, Delhi and thereafter he had also served as the founder-Vice-Chancellor of Sri Sri University, Cuttack. A Professor Emeritus, Dr Mishra has had been a visiting faculty to Columbia and many other universities of the world. His books include “The Game is Changing: Insurance Reloaded”, “Insurance Demystified”, “Reading beyond the Lexicon”, “Medical Informatics: An Exploration”. He has more than three hundred published papers in various national and international management journals. He continues to extend his advice to boost the ailing economy of many nations, including India. In an interview to The Pioneer, Dr Mishra spokes to Sugyan Choudhury on the pandemic economy.
What’s the global response to the pandemic crisis in economic terms?
Commensurate with the scale and speed of the pandemic crisis, domestic and international policy responses of good governments have been large, non-pretentious, rapidly-deployed and speedily-recalibrated. Assuming the pandemic fades in the second half of 2022 and that policy actions taken around the world are effective in preventing widespread firm demise, job losses, and sovereign financial strains, global growth may resume to 6% to begin with. The cumulative loss to global GDP over 2020 and 2021 from the pandemic could be around 9 trillion dollars, greater than the economies of Japan and Germany combined. Flattening the spread of Covid using lockdowns allowed health systems to cope with the disease, which then permitted a resumption of economic activity. Tradeoff between saving lives and saving livelihoods was minimised.
Has India calibrated its economic response to wade through the pandemic?
To be candid, India has suffered from economic governance deficit during the pandemic. Indian economy in recent times can be viewed as pre-pandemic phase, pandemic course phase and post pandemic phase. Before the pandemic, the economy was already slowing down with deficiencies in both consumption and investment demand, the two prime drivers of Indian economy. India is yet to assume export-led economy status. Every crisis presents an opportunity. Government should have utilised the stimulus across sectors to lift the economy out of slippages as also to address the existing inequalities in income and wealth distribution.
Since Q1 of 2018-19, quarterly GDP growth rate was sliding. The last quarter of 2019-20 saw a growth rate of 3.1%. Government economists wished away the downslide blaming structural weaknesses as supply side bottleneck and cyclical problems as demand side. In the Q1 of 2020-21, GDP contracted by 23.9% coinciding with nationwide lockdown. Contraction was expected, but 24% was an international shock and national frustration. Pre-pandemic mismanagement had already created pathway to distress. Nobel laureate Abhijit Banerjee has said demonetisation and GST were plausible causes of the pre-pandemic slowdown coupled with agricultural distress. This momentum was accentuated in course of the pandemic to give the worst-ever economic de-growth of India. But Indian spirit will act as a miracle as economy can only bounce back from this bottom performance decoupled from political economics.
Did Indian stimulus work to poise the economy for adequate growth in post-pandemic world?
Indian Government announced a headline-grabbing Rs 20-lakh crore fiscal stimulus package, meaning 10% of GDP, which was so poor in fiscal firepower to boost demand that the stimulus was globally suspected. Estimates of actual fiscal cost, as percentage to GDP, ranged from 0.75% to 1.30% but nowhere close to the claimed 10% of GDP figure. Making credit available and re-packaging existing government schemes were the highlights of the package. This was corroborated by Goldman Sachs, UBS, CRISIL, Barclays, Bank of America, Nomura, CLSA, Fitch, SBI and HSBC research.
Agriculture, forestry and fishing showed positive growth. However, manufacturing did not respond. If consumer demand recovers, financial, real estate and services including construction sectors will move upwards. Retail trade, tourism, transport, communication suffered the most though the communication sector progressed selectively. Electricity, gas, water, public utility, public administration, Defence and other services were not as much affected due to nature of their consumers.
How should India prioritise now to survive social unrest, sustain existing economy and remain growth-ready?
Programmes like Pradhan Mantri Garib Kalyan Ann Yojana (PMGKAY) and other PDS measures should continue till end of the pandemic first because India has sufficient food grains in store; second, this will release purchasing power of masses to stimulate other consumptions; and third, India cannot afford a social unrest of hungry masses. Migration and reverse migration crises should teach lessons to governments. MGNREGA can at best give some relief in rural areas. But political leadership must exhibit its smartness to provide employment or self-employment to urban youths in particular. This alone can boost purchasing power and demand, which will create its own supply and virtuous circle of employment. Direct Cash Transfer is yet another consumption-stimulant and corruption-container. Differential tax relief to producers, in particular startups, MSMEs and other dispersed employment providers is a right step. As Minister Nitin Gadkari rightly emphasises, public investment in physical and social infrastructures will create a win-win situation giving sovereign guarantee to better return to public and providing bargaining edge to mobilise international capital. The FRBM (Fiscal Responsibility and Budgetary Management) Act restricts government ability for deficit funding of stimulus. This should be ignored in the initial years of post-pandemic revival as is done now. Coupled with this, government must be transparent about monetisation of fiscal deficit arising out of a genuine stimulus.
India is facing inflationary pressure, which makes Indian consumers more nervous. Banks are nervous to lend and put surpluses of Rs 7 lakh crore with RBI. Supply chain disruption is being assuaged slowly. RBI is failing in inflation targeting of4%+/-2% as iys monetary policy committee has no clue to arrest imported inflation. When the USA goes for a genuine stimulus of 1.7 trillion dollars, money will obviously trickle to financial absorbents like India; and in absence of efficient manufacturing and supply chain to arrest commodity prices, inflation is imported. Monetisation of economy in India in agriculture, MSME and household sectors cannot be controlled to ensure growth despite ‘cashless’ noises.
What may be the major pain of post-pandemic economic growth in India?
India will surely make economic strides after pandemic phase. But ideal should be a “V”-shaped growth where all de-growth is recouped and a new asymptotic phase of growth begins. But signs are India will have a “K”-shaped growth, meaning rich and cronies will grow faster and due to jobless growth and imported inflation, large mass of Indians will still face de-growth in their personal wealth. This can be assuaged by dispersing production, generating employment, ensuring economic redistribution after creating distributive effect and finally punishing cronyism in capital formation and allocation.
